Commercial UAS market opportunities

Most analysts expect the commercial market for unmanned aircraft to eventually dwarf that of the military market. Unmanned aircraft systems (UASs) have changed the face of modern warfare and created a huge opportunity for electronics suppliers that provide systems for the UAS payloads, ground control stations, and flight controls. Are those same suppliers likely to benefit from the eventual commercial applications of this technology or is the difference between the markets going to throw a wrench in that transition?

“The FAA’s notice of proposed rule making on unmanned aircraft is still on target to be posted or handed down late calendar or third quarter of this year,” says Ron Stearns, Research Director at G2 Solutions. That will start an 18-month clock of revisions and comments and “by 2016 or 2017 we should see commercial access for small UASs in specific airspace and controller-radius paradigms become a reality, catering first and foremost to forestry, agriculture, oil & gas, and electrical infrastructure, where I believe there is demand for this technology.

CAPTION: Pictured is the DROID, Dryden Remotely Operated Integrated Drone, from NASA is being used to test collision avoidance solutions to enable unmanned aircraft to fly in the national airspace. Photo by Tom Tschida, courtesy of NASA.

One of the keys for making a business case for commercial use of unmanned aircraft will be reducing the cost per flight hour down to a level comparable to conventional piloted alternatives, Stearns says. “Collision avoidance technology will also need to be improved for use on unmanned aircraft. It is not at an acceptable level yet for the FAA, but in the near term they will fly in a segregated airspace where sense and avoid needs will be mitigated. I expect someone to come up with a solution for this space at a nice price and they will own it.

“Companies who will have the biggest head start in [the commercial UAS] market will be defense avionics and electronics suppliers who have been there and done that with this technology,” he continues. “However, it is a very different operating space for them, akin to a purely commercial electronics company trying to sell in the military procurement realm. I see the commercial unmanned systems market being a more speculative venture for defense suppliers as they will have to use internal R&D dollars to create solutions that match commercial form factors.

“There is also no guarantee like what they’d get with a Department of Defense (DoD) program of record,” Stearns continues. “There is no Office of Naval Research or Special Operations Command to incubate commercially configured sensors or electronics. Looking from the outside I can understand the difficulty business managers would have selling this opportunity up the food chain in their organizations. It would require taking some risk that could hurt them if the reward does not materialize during an anticipated timeframe.”

“[Unmanned technology] has enormous marketplace potential and we think that the traditional defense companies will take advantage of this,” says Bryan Brady, Vice President/Director of Vertical Markets at Avnet. “Some unmanned aircraft military applications such as persistent stare will be applicable to commercial uses for combating forest fires and search and rescue operations. However, the cost of these will have to be reduced before this transition becomes commonplace.

Military unmanned aircraft market

While the commercial market of UAS technology promises to explode in the near future, the U.S. military unmanned aircraft market has become one of sustainment. “The build out of big programs of record in military unmanned aircraft has slowed,” Stearns says. “Major DoD programs of record are nearing the end of their production runs such as the Air Force RQ-4 variants and the MQ-9. The MQ-1C will likely see the end of its run in 2015. This has been expected as the industry is becoming one geared toward sustainment and upgrades. DoD opportunities are now flowing back to the traditional primes and away from smaller niche UAS suppliers. It is a gradual shift to traditional acquisition and away from joint urgent operational needs [JUONS], services, and quick reaction capability [QRC]. So if you look at the DoD UAS market strictly with regard to program-of-record procurement and RDT&E, then yes it’s falling. However, if you look at it from an Operations & Maintenance [O&M], services, non-programs-of-record, and special access programs perspective it looks pretty steady.

From a procurement and RDT&E standpoint the military unmanned systems market is stable at $2.5-3 billion a year through 2019, Stearns continues. “The FY 2015 budget request had fallen slightly but that did not show the O&M dollars, which would likely add about another billion on to that. Then you could add in services contracts – like Boeing Insitu has with their aircraft contracts – which is at least a couple hundred million dollars a year.

“So if I add up all program of record spending for Research, Development Test & Evaluation (RDT&E) within FY 2015 it comes to about $17.8 billion,” he says. “Funding for new platforms such as the Unmanned Carrier-Launched Surveillance and Strike [UCLASS] is programmed, although changes in system requirements could shift progress to the right. The big question mark is the uncertainty as to whether the Long Range Strike program’s Next Generation Bomber will have an unmanned or optionally-manned component. If that decision is made in favor of unmanned capability it would add about $12 billion to the total spending through 2019, some of which would be directly attributable to UAS platforms. This is the type of large defense program that really moves the needle for the defense electronics industry.”

UCLASS will be another big needle mover for the U.S. military UAS fleet. “UCLASS is currently the largest new-build DoD UAS competition,” Stearn says. “Northrop Grumman, The Boeing Company, Lockheed Martin, and General Atomics-ASI are competing for it and is worth about $2.9 billion (2012-2019) as an acquisition piece with RDT&E funding included. Consistent messaging as of late indicates a Navy desire for UCLASS to perform surveillance first and strike second. It is perhaps the most visible of programs in a competition phase. It was originally scheduled to reach an initial-operational capability [IOC] by 2020, but it is now looking more like 2022. If the concept of operations proceeds as envisioned UCLASS could add unprecedented situational awareness capability to the carrier battle group. However, from an outside perspective it appears that the Navy wants to get it as right as possible then move forward with it,” he continues. “If they do it right the UCLASS could add unprecedented situational awareness capability to the carrier battle group.”